One Perfect Storm and One Plastic Storm Shrink Holiday Sales

one-perfect-storm-and-one-plastic-storm-shrink-holiday-salesRetailers fought the headwinds of two entirely different storms this month, both of them likely to shrink holiday sales. The first storm was natural -- a massive blizzard in the Northeast and parts of the Midwest that kept shoppers at home on Super Saturday. The traffic-measurement company ShopperTrak found that for the full Super Saturday weekend (Dec. 18-20), year-over-year retail sales slipped 2.1 percent, totaling $18.8 billion. %%DynaPub-Enhancement class="enhancement contentType-HTML Content fragmentId-1 payloadId-61603 alignment-right size-small"%%The second storm was financial, a creation of the credit card industry, which cut customer spending limits and rejected more credit card applications than it previously had. The consumer-polling firm America's Research Group expects this tightening of credit could result in $9 billion in lost holiday sales revenue.ShopperTrak's National Retail Sales Estimate reported that retail sales for the last Saturday before Christmas, or Super Saturday, fell a sharp 12.6% as compared to last year. Super Saturday traditionally is the second-highest spending day of the holiday season. Saturday sales accounted for $6.9 billion, as opposed to $7.9 billion last year and $8.7 billion in 2007. Regionally, the drop-off was 17.3% in the Northeast, but even the South, which didn't face a snowstorm saw a drop of 14.6% in sales. The Midwest saw a drop of 10.1% and the West posted the smallest loss at 7.1%.

"Mother Nature was very unkind to retailers on Saturday as the year-over-year sales decline was the largest we've seen since we began reporting this number in 2002," said Bill Martin, co-founder of ShopperTrak, in a statement released with the report. "We originally predicted Super Saturday would be the number two sales day of the season just behind Black Friday, with the full weekend landing just ahead of Black Friday weekend as the top performing period. But after analyzing our data following the storm, it's fairly apparent neither will be the case."

But all is not lost. "Our data shows when there is a significant weather event, shoppers spend both before and after in higher numbers and we estimate that both Friday (12/18) and Sunday (12/20) posted retail sales gains in all regions of the country," Martin added. "Additionally because there are four full shopping days leading up to Christmas this year, we anticipate the Northwest and South regions will post higher spending levels this week due to pent up demand – boosting sales figures for the season. We'll know next week if our original prediction of a 1.6 percent sales increase with a 4.2 percent total U.S. foot traffic decline is still intact."

Consumers didn't stop spending altogether this weekend. ComScore reports that online sales jumped 6% last week to a new record, thanks to the fact that consumers were snowed in. The Internet research firm said that for the first 50 days of November and December, online sales totaled $25.5 billion, up 4%. Figures on Saturday and Sunday jumped 13%, helping to push the period starting Dec. 14 to a one-week sales record of $4.8 billion.

Credit Card Companies Get Grinchy

Now, getting back to the unnatural storm created by Scrooges in the credit card industry. In an effort to gain revenue and reduce risk before the recently enacted consumer-protecting CARD Act takes effect in February, credit card companies lowered credit limits and raised interest rates on millions of customers. Credit card users responded by closing their wallets. About 55% of them reduced the amount they spent on credit cards, and retailers are paying the price.

Britt Beemer of the American Research Council told Bloomberg that a reduction in available credit hurts retail sales disproportionately. Credit cards normally are used for purchases over $50, so with less credit available, fewer large purchases will be made. This will impact sales of some of retailers' most profitable items -- clothing, jewelry and home goods.

Clearly, consumers will be spending less this season. And while the weather may have been a factor in when they shopped, it's likely that scarce consumer credit will be the primary factor in reducing how much they spend.
Read Full Story

Sign up for Breaking News by AOL to get the latest breaking news alerts and updates delivered straight to your inbox.

Subscribe to our other newsletters

Emails may offer personalized content or ads. Learn more. You may unsubscribe any time.